DOF puts PCIC under IC custody

MANILA, Philippines — In a last-minute move before leaving office, Finance Secretary Carlos Dominguez III has placed a state-run firm bleeding in losses under the supervision of the Insurance Commission (IC).

Under Department Order 38-2022 dated June 28, the Department of Finance (DOF) ordered the IC to monitor the activities of the struggling Philippine Crop Insurance Corp. (PCIC).

Dominguez said the IC is mandated to conduct an examination of the business affairs, financial condition and insurance method of the PCIC at least once in three years.

The IC is then tasked to submit the results of the assessment to the DOF for its own evaluation. The order takes effect immediately.

Dominguez – who will relinquish his post today, June 30 – has subjected the PCIC to a series of financial checks due to its exposure to risks. The IC has discovered that the bulk of PCIC’s assets at about 40 percent is invested in banks and time deposits.

The IC warned that the agency’s lack of investment income to bankroll its services puts itself at risk of financial instability in the long run.

The Bureau of the Treasury, on the other hand, proposed that PCIC funds be invested to rake in gains in the form of dividends, especially as the state-owned insurer maintains an equity surplus of P1.1 billion.

In May, Dominguez urged the Treasury and the Department of Budget and Management to work together in bringing down the subsidies to be given to the PCIC next year.

Based on data, subsidies extended by the government to the PCIC rose by 46 percent to P4.61 billion in 2021, from P3.16 billion in 2020. Likewise, financing support received by the agency hit P28.6 billion in the past two decades, pushing it on the brink of financial collapse for relying too much on public funds.

Also, a study by World Bank senior financial sector specialist Benedikt Signer found out that the PCIC covers only one in three farmers in spite of securing billions of pesos in subsidies. Signer also said the way the agency uses its capital, rates its premiums and files its finances no longer complies with international standards.

“To put it very bluntly, I guess as a starting point, the World Bank’s findings were that the current agriculture insurance approach in the Philippines is not providing adequate value for money to the Philippine taxpayer, nor adequate protection to farmers,” Signer said.

In 2021, President Duterte signed an executive order transferring the PCIC from the supervision of the Department of Agriculture to the DOF in line with efforts to reorganize the agency.